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What is a distribution network?

Jan Tore Pedersen | 05. Oct 2018
3 minutes read

A strong and efficient distribution network is an important asset for a manufacturer. But what exactly is a distribution network, and what are the advantages?

Investopedia defines a distribution network as “an interconnected group of storage facilities and transportation systems that receive inventories of goods and then deliver them to customers. It is an intermediate point to get products from the manufacturer to the end customer, either directly or through a retail network.”

‘Logistics network’ and ‘shipping network’ are other terms used (the latter typically referring to a global network of maritime services). In our context, a distribution network is the combination of transportation, terminal and warehousing services that we have established to best serve the needs of our customers.

In a nutshell: A distribution network is the system you as a manufacturer use to get your products to your end customer, via intermediaries.


Different shapes of distribution networks

Distribution networks can vary in shape, from small and simple-size networks to large and very complicated networks of logistics operations, used by large enterprises such as Apple or Amazon.

Factors involved in defining the shape of the distribution network are end customer product demands, product variety, product availability, response time, returnability, and customer experience.

For small and medium-sized companies, an established distribution network is not necessarily a high priority. However, it may be convenient to have logistics alternatives available should some form of emergency occur.


Advantages of a distribution network for manufacturers

Distribution is a key driver of your overall profitability, because it directly impacts both supply chain costs and how satisfied your customers are with your products and services. For this reason, establishing an agile and reliable distribution network is increasingly considered a critical asset for business success.

An established distribution network can be used to achieve a variety of supply chain objectives:

  • Reduced costs
  • A tighter focus on your core competencies
  • Wider customer reach
  • Logistics support
  • Easily available feedback
  • Faster growth

Is it difficult to establish an effective distribution network?

It is easier than you may think. There are cloud-based logistics management systems available that allow you to create a set of optimised logistics services designed to suit your particular needs to serve your customer base.

Each time you need to organise a transport, the system can automatically choose the optimal path through the network, based on your requirements. Such requirements may be lowest possible cost, just-in-time, lowest possible emission, as fast as possible, and so on.

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